VAT is being removed from household electricity bills – here's what it means for you
Updated on 22nd July 2026 by:
John Evans, Commercial Director, British Gas Energy
Any help with energy bills is welcome news. That's why we're pleased to confirm that, following the government's recent announcement, we'll pass the new VAT reduction onto all eligible British Gas household electricity customers from 1st October 2026.
As part of new Prime Minister Andy Burnham's pledge to help with the cost of living, the government will cut VAT on household electricity bills from 5% to 0% for six months. The change is designed to give households some extra breathing space, with the Prime Minister saying it will help "put more money in people's pockets".
The VAT cut is expected to save a typical household around £45 a year, although the exact amount you save will depend on how much electricity you use.
What does this mean for British Gas customers?
If you're a British Gas household electricity customer, we'll automatically apply the VAT reduction to your electricity bills from 1st October 2026. This includes customers on fixed tariffs, so the reduced VAT rate will simply be reflected on your bill once the change comes into effect.
That means you don't need to contact us, update your account or switch tariff to benefit from the government's announcement.
Watch our short video for more about the VAT cut on energy and what it means for your bills.
How much could you save?
The government estimates that a typical household will save around £45 over the year.
The amount you save will depend on how much electricity you use. Homes that use more electricity are likely to see a larger saving, while those that don’t use as much may save a little less.
We're here to help
We know that many people are still feeling the pressure of rising energy costs, and while this VAT reduction is welcome news, it may only be one part of the picture.
If you're finding it difficult to pay your energy bills, support is available. Just speak with your energy supplier for help to manage your payments. The British Gas Energy Trust also offers grants and practical advice to people who need it most. You don’t have to be a British Gas customer to apply.
Chris O'Shea, Group Chief Executive of Centrica, said:
It's encouraging to see the new Prime Minister move quickly to help households with the cost of energy. Any reduction in bills will be welcome news for customers and it's good to see affordability being made a priority from day one. We will, of course, be passing this reduction on to our customers.
We've been clear for a long time that help should be targeted at those who most need it. We continue to believe that the most sustainable solution would be a targeted social tariff to support vulnerable households, and we look forward to helping the government deliver that at the earliest possible opportunity.
Looking for more ways to save on your energy bills?
The VAT cut is one way your electricity bill could come down, but it's not the only one.
Choosing a tariff that suits the way you use energy could help you get even more value from your electricity. Whether that's the reassurance of a fixed tariff or the flexibility of a smart tariff, we're here to help you find the right option for your home.
Explore our range of British Gas energy tariffs and discover more ways to make the most of your energy.
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